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Recently I was asked what is a typical finders fee for raising capital?
Good question, exclusive or not, it can depend on the quality of the deal.
We have agreements for a little as 3% and some as high as 10%. There are so many aspects of a deal that can make this affect the percentage, primarily based on the viability of the deal and how "early" stage they are.
Assuming all the necessary documents are in order...
If it is debt financing? " You normaly will be paid lower fee for Debt"
If it is Equity " Higher fees can be expected for equity projects"
Is it a private company?
Common or Preferred stock?
Product or service?
Size of industry?
First round, second?
So much to consider.
We usually will negotiate a Fee on average of 5% depending on the ammount of finanacing required. When your dealing with Project under 1 million the fees are normally over 5% deals over 1 million 5% and under depending on the answer to the questions above.
Hope this gives you a better understanding on how Finders Fees are determined.
Small businesses looking for financial help from an “angel” often turn to individuals willing to invest in promising, start-up opportunities. Angel investors can be a good funding source to consider after you’ve tapped your friends and relatives. But angels usually don’t write blank checks. They’ll want to see progress and a way to exit the deal down the line with meaningful profits. So expect angel investors to do a lot of research and careful investigation into your business plan.
Be thoughtful in approaching potential investors. Biotech investors, for example, don’t want to hear about a clothing manufacturer. A scattershot approach is likely to turn them off. Industry associations, local trade groups or, in some states, business-incubator centers can help point to potential angels.
Angel investors often invest through groups or networks. These provide due diligence, extra research, access to potential deals and shared expertise that one person operating alone generally doesn’t have. For instance, one member of an angel group might have background in a particular industry or the know-how to set up deal terms, sharing that knowledge with the other investors.
Angel investors are usually thorough, so don’t expect to get your money quickly. It could take several months to meet with different individuals or groups and answer all of their questions. (There are exceptions, including the case of Google, which got funding from an angel before its cofounders finished their presentation to him.)
Because they’ll own a part of your company, they’ll likely want a say in major decisions, and they’ll watch to see whether you listen to them. Don’t expect them to write a check and walk away. Many angel investors are former business owners who want to help people like themselves. They may be able to provide good advice based on their previous experiences.
Getting funding from angel investors isn’t easy, but it can be done if you take the right approach and are a good match with their interests. And the benefits can beyond the money for your business, but their expertise in both in business operations and your industry niche.
If I were to write a post with tips for Start-ups, I don’t think I could get much better than Neil Patel’’s recent post - 10 Business Mistakes That Will Nearly Break You… Literally. The first 5 are especially spot on. My favorite:
2. Get Out of Your Cave
Do you have an idea of where you want to take your business? I hope you don’t because your vision is probably different than your customers.
You have to get out of the mindset of “I want” because it doesn’t really matter what you want. All that matters is what your customers want.
Start surveying your customers to figure out what they want and more importantly understand why they want it. This will help you create a product where customers would be very disappointed if your product or service didn’t exist. Having this will help you make more money.
I certainly don’t have a list of things it takes to succeed, but one thing I generally recommend to entrepreneurs interested in starting a company is you need to take action.
Planning is fine, but without action there is no way you can succeed. Plus, planning only goes so far and too much planning likely won’t help you.
The way to learn what the market wants is to dive into it and figure out what works, what doesn’t, what is needed, and what isn’t needed. Tweak and continue on your quest. This leads to another point by Neil:
Agility is what you have that a bigger company doesn’t.
Act. Reflect and get feedback. Revise. Repeat.
Business Week’s Small Biz blog regarding the trend of an increase in angel funds. I think one reason for this trend is a result of some angel investors who are excited by the idea of investing in startups, but are not able to dedicate the time to be an active angel investor.
Angel investment networks had a larger growth period a few years ago, whereas previously, individuals dominated angel funding and invested on their own (or with a small number of other people). It may be possible that many of these angel investors were more interested in the investing part than they were interested in other aspects of angel investing such as being “smart money” where the angel investors provide a large amount of advice and guidance. In addition, many angels would prefer to let others do the screening, due diligence, negotiations, and other work associated with getting a deal done.